Financial payments flow between firms and government, Macroeconomics

Explain whether, the following statements are TRUE, FALSE or UNCERTAIN. Briefly justify your answer.

(i) The circular flow shows how real resources and financial payments flow between firms and government.

(ii) A leakage is money that flows to firms without being cycled through households.

(iii) A closed economy is an economy with excessive government expenditure

(iv) The larger the marginal propensity to consume, the larger is the multiplier.

(v) A change in the amount households wish to save of each levels of income leads to a change in equilibrium income, but no change in equilibrium saving, which must equal planned investment.

(vi) An increase in government expenditure accompanied by an equal increase in net taxes will have no effect on output.

(vii) Shocks to aggregate demand immediately be offset by fiscal policy.

(viii) The effect of foreign trade is to reduce the size of the multiplier

(ix) The precautionary motive for holding money reflects a need for liquid assets.

(x) When you tried everywhere else to get money for your holidays, you go to the lender of last resorts

(xi) Movements along the IS schedule tell us about shifts in equilibrium income caused by shifts in the aggregate demand schedule as a result only of changes in interest rates.

(xii) There are no costs to inflation so long as it can be fully anticipated.

(xiii) Unemployment is always a bad thing.

(xiv) The law of comparative advantage ensures that there are gains from trade which make everyone better off.

Posted Date: 11/26/2013 6:11:23 AM | Location : United States

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